A benchmarking lifecycle

I’ve mentioned a benchmarking life cycle in my previous benchmarking posts, and there is a definite trend I see emerging among the organizations I work with on a daily basis.

The benchmarking need is born

The “need” to benchmark is generally born from a few key categories:benchmarking, cost, peer group, growth, comparison

  • External disruption: A shift in the marketplace occurs, like new regulations, an economic downturn, or a new competitor on the landscape.
  • Internal disruption: A shift in the internal organization occurs, like a new leader, a new operating or improvement initiative is rolled out (Lean, Six Sigma, Shingo, Baldrige, etc.), or perceived excessive costs and/or frustration in a given area of the organization.
  • Airline magazine: Someone’s boss reads about benchmarking in one an airline magazine on a business trip, returns to work the next week and announces, “We are going to benchmark!”

Benchmarking what they think they need

One of these precipitating events triggers “benchmarking”. Initially, this usually means a metric-based, comparative activity of some sort. An approach generally characterized by collecting data, inputting data into a survey (or data service) of some type, and comparing key performance indicators to a peer group (or peer groups).

The first time through, though, the results are usually incite discussions about everything that is wrong with the data and reports, such as, “I don’t believe the data”, “the peer groups are not like us”, and/or “there is no way this data is valid; we aren’t that bad”.

Poorly performing organizations seldom believe the data. They question it every time. They’ll admit they learned something about themselves going through benchmarking process, they may change a few things based on the results, but more often they move ahead as normal; prior to benchmarking.

Time passes…

But, the issue doesn’t go away. They still have performance issues, they are still dealing with the disruptions, and they don’t have a grasp on what needs to change within their organization or any direction on how to change it.

Benchmarking to find the real answer

Some organizations (the really stubborn ones) may go through this cycle again. But, usually about the second or third time they go through this data-comparison approach to benchmarking, they will finally start asking the correct question. “OK, I get it. The data says we are behind this peer group in performance. How are they able to achieve this level of performance?”

This is the real focus of what they need to know. It isn’t about the “number”, it is about the “how”. I’m not saying that you don’t need valid and reliable data. You definitely do.

My experience has shown me that the best performing organizations are those that spend less time on questioning the data and more time on figuring out how to change their organization. They question the data, for sure, but once they understand the factors influencing the benchmarking data, they quickly focus on how they can use it to improve within the context of the data’s’ limitations.

So what if the value you are being compared to is off by 10% and you really aren’t that far behind “the benchmark”. Wouldn’t you still want to try to surpass that value? Wouldn’t you want the best possible performance you can get?

My advice is focus on the “win,” don’t focus on the “whine”. Understand the data and its limitations, but get to the real benchmarking need fast. At least that is how I’ve seen the stellar organizations approach benchmarking. Here are some case studies of organizations that have used metric-based benchmarking pretty effectively.

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Categories: Benchmarking, Continuous Improvement

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